Commentary

War Makes Spending Reform Even More Important

The war in Iraq comes with a big price tag. The president has just asked Congress for $75 billion of funding. That’s a high cost. But it’s just one piece of a spending explosion that has occurred since the late 1990s. Even without the war total federal spending will jump $132 billion this year, on top of a huge $147 billion increase last year.

The spending explosion began soon after the budget was balanced in 1998 for the first time in 29 years. Surpluses caused Congress to lose all discipline and go on a spending orgy in such areas as farm subsidies and education.

Unfortunately, while President Bush is a tax reformer, he has shown no leadership on spending reform. Discretionary spending has risen faster in his first three years than any president in decades. Look at education. Republicans used to argue that federal education spending should be zeroed-out because it is properly a state and local function. But education spending has soared from $40 billion to $61 billion in just three years with Bush’s strong support.

Bush and the Republicans need to understand that in order to pursue further needed tax reforms, they must create budget room by controlling spending.

Of course, Democrats argue that tax cuts cause deficits. But that’s not correct — spending is the real deficit driver. Consider that under Bush’s budget federal spending will be $596 billion greater in 2008 than it is today. By contrast, Bush’s tax cuts, including the dividend tax cut, will reduce revenues by just $74 billion in 2008. Therefore, spending increases outweigh tax cuts 8-to-1 by the end of the five-year budget plan.

After the war, Bush must shift gears and support serious spending reforms. Otherwise, he will be the president that revived Big Government soon after Bill Clinton said that Big Government was dead.

Chris Edwards is director of fiscal policy at the Cato Institute.